June 7, 2017 / 6:17 AM / 2 months ago

EM ASIA FX-Asian currencies fall as investors give up risk assets

5 Min Read

    * Asian currencies fall on risk aversion
    * Won is the worst performer on weak equities
    * Indian rupee flat ahead of policy rate decision

 (Adds text, updates prices)
    By Patturaja  Murugaboopathy 
    June 7 (Reuters) - Most Asian currencies edged lower ahead
of a series of economic and political events on Thursday, as
investors braced for the possibility of extreme moves in the
market.
    Three key events -- UK elections, a European Central Bank
policy meeting and testimony by former FBI director James Comey
-- are all set for Thursday. 
    "We saw a mild version of risk aversion as traders prepare
for the big macro events at the back end of the week." said Greg
McKenna, chief market strategist at CFD and FX provider
AxiTrader.
    Safe havens such as gold and sovereign debt were preferred
by investors. The Japanese yen inched down against the
dollar on the day, hovering near the 1-1/2-month high hit on
Tuesday.
    "Safe haven demand for the JPY may also increase ahead of
'Super Thursday', particularly that of the UK elections of which
the outcome has become more uncertain," Bank of Tokyo-Mitsubishi
UFJ said in a research note.
    UK polls have been mixed suggesting outcomes ranging from a
majority for Prime Minister Theresa May's party to a 'hung'
parliament in which no party has an overall majority. 
    Lingering unease over the isolation of Qatar by a number of
its Middle East neighbours, in protest at what they say is the
Gulf nation's support for terrorism, also kept investors on the
sidelines.
    With a fall of nearly half a percent, the South Korean won
 was the worst performer in the region, tracking the
weak domestic equities market. 
    Meanwhile, stronger guidance by the People's Bank of China,
setting its midpoint fixing at a fresh 7-month high, could not
prevent the yuan's fall as strong corporate demand for the
dollar undermined the local currency.
    The market is anxiously waiting for China's May foreign
exchange reserves data, due later on Wednesday, for clues on the
authorities' efforts to stem capital outflows.
    "There has been a pick-up in capital outflows over the last
two months and another increase in outflows during May would be
consistent with the pick-up in FX intervention," Sue Trinh, head
of Asia FX strategy at Royal Bank of Canada, said in a report.
    Analysts expect the Thursday events to bring some volatility
to Asian currencies as their volatilities have fallen to
multi-month lows recently. The 10-day volatility of the South
Korean won stood at 5.46 percent, the lowest in 32
months, while Taiwan dollar volatility at 5.7 percent was
the lowest in seven months.
    
    INDIAN RUPEE
    The Indian rupee was trading flat ahead of the
central bank policy meeting on Wednesday.
    Analysts expect a less hawkish tone from the central bank to
reflect reduced fears over inflationary pressures.
    "We expect the RBI to leave its policy rate unchanged at
6.25 percent and to soften the stance of monetary policy on
Wednesday. If so, we could see more portfolio inflows going
forward," Scotiabank said in a report.
    "On the other hand, it will disappoint both the government
and foreign investors if the central bank decides to keep up its
hawkish tone this afternoon." 
    
    CURRENCIES VS U.S. DOLLAR
   Change on the                                     
  day at   0540                             
       GMT                                  
  Currency         Latest bid     Previous   Pct Move
                                       day  
  Japan yen        109.510           109.4      -0.10
  Sing dlr         1.381            1.3791      -0.15
  Taiwan dlr       30.094           30.093      -0.00
  Korean won       1122.900         1118.3      -0.41
  Baht             34.018           34.013      -0.01
  Peso             49.560            49.56      +0.00
  Rupiah           13308.000         13297      -0.08
  Rupee            64.403            64.43      +0.03
  Ringgit          4.268             4.265      -0.07
  Yuan             6.795            6.7945      -0.01
                                                     
  Change so far                                      
 in 2017                                    
  Currency         Latest bid  End 2016      Pct Move
  Japan yen        109.510          117.07      +6.90
  Sing dlr         1.381            1.4490      +4.91
  Taiwan dlr       30.094           32.279      +7.26
  Korean won       1122.900        1207.70      +7.55
  Baht             34.018            35.80      +5.24
  Peso             49.560            49.72      +0.32
  Rupiah           13308.000         13470      +1.22
  Rupee            64.403            67.92      +5.46
  Ringgit          4.268            4.4845      +5.07
  Yuan             6.795            6.9467      +2.23
   

 (Reporting by Patturaja Murugaboopathy in Bengaluru; Editing by
Jacqueline Wong)
  
 
 

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